Rating Exchange

   Currency exchange rates, the bane of many a tourist's mental and fiscal balance, are subject to the same Law of Supply and Demand as any other commodity.
   Normally, people don't think of money as a commodity, but it is, because people want it and are willing to pay to get it. At its simplest, this is the Labor Theory of Value: Anything can be valued in terms of the amount of labor required to get it.

   When a person or firm does business internationally, the goods or services must be paid for in the local, or seller's, currency. If the buyer doesn't have the local currency, he must somehow acquire it elsewhere. In effect, he goes to the foreign exchange market and buys it. And here is where the Law of Supply and Demand applies.
   Tourists, however, function at the retail level in the foreign exchange market, so a drop of one-tenth of a cent is barely noticeable when spending $100. In fact, it's a change of exactly one cent. On the wholesale level -- the international foreign exchange market, where trades are numbered in the millions of dollars -- a drop of one cent on a million-dollar trade amounts to a difference of a thousand dollars. And that becomes quite noticeable when it's done many times a day.

   The advantage of a common currency, for example the U.S. dollar throughout all 50 states, the several territories and various nations that use the dollar rather than issue their own money, is that this value in exchange is uniform.
   So also with the 17 nations of the European Union that use the euro as a common currency. There is no "foreign exchange" when traveling, importing or exporting among them. There are, however, other factors that affect prices and wages within each nation, just as there are differences between various regions, states and cities in America.
   There is, then, at least one good economic reason to preserve the European Union -- a common currency, which helps facilitate trade and growth.

   Unfortunately, some nations issued euro-denominated bonds, borrowing beyond their ability to repay.
   And unlike in America, there is no federal government or strong enough central bank to bail them out.
   Consequently, unless other economically and fiscally healthy euro zone member nations are willing to help shore them up, the governments and economies of the poorly managed nation-states will collapse.
   And one by one the euro zone dominoes fall.